Credit-Deposit ratio drops in J&K

Srinagar, Jun 28: Jammu and Kashmir’s banking sector has reported a slowdown in credit deployment, with the overall Credit-Deposit (CD) ratio slipping to 61.14 percent as of March 31, 2025.

The dip, amounting to a decline of about two percentage points compared to the previous financial year, has raised concerns within the J&K administration.

It has now prompted a directive to banks to expand credit outreach, particularly in under-banked and rural areas, within a fixed time frame.

The CD ratio is a key financial metric that indicates the proportion of a bank’s deposits that have been lent out as loans.

It’s calculated by dividing a bank’s total loans by its total deposits, expressed as a percentage.

The official data reveals that banks operating in J&K collectively handle deposits of over Rs 1.96 lakh crore, while advances stand at approximately Rs 1.20 lakh crore.

The total number of bank branches in J&K is 2197.

Gross Non-Performing Assets (NPAs) across districts have reached Rs 4695.45 crore, further highlighting the need for balanced and responsible lending.

Principal Secretary, Finance, Santosh D Vaidya, while taking note of the downward movement in the CD ratio, termed the decline as a challenge.

At a recent financial review meeting, Principal Secretary, Finance, Santosh D Vaidya described the dip as a wake-up call.

“Comparing with the earlier set of figures, there is an overall improvement on several fronts, but on CD ratio, there is a slip-up of around 2 percent. And pulling back by 2 percent is going to be a challenge, which needs to be vigorously followed,” he said.

To address the concern, Vaidya directed all public sector banks operating in J&K to channel at least 40 percent of their lending into priority sectors, which include agriculture, MSMEs, education, affordable housing, and other key segments vital to inclusive economic growth.

At the district level, variations in credit performance are sharp and telling.

Srinagar continues to lead in overall banking activity with 253 branches.

The district holds deposits worth Rs 39,398.22 crore and has extended credit amounting to Rs 26,069.40 crore, resulting in a CD ratio of 66.17 percent.

However, it also accounts for the highest volume of NPAs, recorded at Rs 1902.48 crore.

Kupwara district has posted the highest CD ratio in J&K at 126.80 percent, with 91 branches servicing Rs 3714.69 crore in deposits and Rs 4710.41 crore in advances.

Shopian, with 41 branches, follows closely with a CD ratio of 116.78 percent, based on Rs 1889.72 crore in deposits and Rs 2206.91 crore in advances.

Budgam and Pulwama have also shown strong lending trends, registering CD ratios of 106.65 and 108.47 percent.

Budgam, with 111 branches, holds deposits of Rs 4917.95 crore and advances of Rs 5245.12 crore, while Pulwama has 97 branches, deposits of Rs 5159.45 crore, and advances totalling Rs 5596.57 crore.

In Bandipora, the CD ratio has reached 94.91 percent, with deposits of Rs 1908.21 crore and credit of Rs 1811.15 crore across 47 branches.

Baramulla, which has 170 branches, has maintained a healthy CD ratio of 92.57 percent, backed by deposits of Rs 8201.27 crore and lending of Rs 7592.17 crore.

Ganderbal, with 49 branches, has deposits of Rs 2253.59 crore and advances of Rs 2057.07 crore, amounting to a CD ratio of 91.28 percent.

Kulgam and Anantnag have also performed moderately well, with CD ratios of 83.06 and 76.76 percent.

Contrastingly, several districts have shown weak credit performance.

Jammu district, despite having the highest number of bank branches at 464 and a deposit base of Rs 67,976.49 crore, has recorded a low CD ratio of 40.16 percent with advances standing at only Rs 27,298.99 crore.

Rajouri has posted a CD ratio of 55.58 percent, with deposits of Rs 7033.45 crore and advances of Rs 3908.84 crore across 98 branches.

In Kathua, the CD ratio stands at 54.13 percent, with 129 branches managing Rs 10,818.90 crore in deposits and Rs 5856.77 crore in credit.

Reasi and Udhampur have CD ratios of 53.81 and 53.99 percent.

Reasi has deposits of Rs 3778.55 crore and advances of Rs 2033.13 crore across 57 branches, while Udhampur has 98 branches managing deposits of Rs 7592.14 crore and advances of Rs 4098.99 crore.

Samba, Poonch, Doda, Ramban, and Kishtwar have also reported mixed performances.

Samba’s CD ratio is 60.27 percent with deposits of Rs 8254.29 crore and advances of Rs 4975.17 crore.

Poonch, with 58 branches, has deposits of Rs 4212.95 crore and advances of Rs 2168.63 crore, resulting in a CD ratio of 51.48 percent.

Doda has a relatively healthier CD ratio of 78.06 percent, based on Rs 3339.60 crore in deposits and Rs 2606.93 crore in advances.

Ramban, with 38 branches, holds deposits of Rs 2237.86 crore and credit of Rs 1511.80 crore, achieving a CD ratio of 67.56 percent.

Kishtwar, the smallest district in terms of branch network with 35 branches, has deposits of Rs 2782.55 crore and advances of Rs 1671.82 crore, recording a CD ratio of 60.08 percent.

In total, the 10 districts with stronger credit profiles collectively operate 1056 branches, manage Rs 78,941.23 crore in deposits, and have extended Rs 64,292.64 crore in loans, resulting in a regional CD ratio of 81.44 percent.

The remaining 10 districts operate 1141 branches, hold deposits of Rs 118,026.79 crore and have disbursed Rs 56,131.08 crore in credit, with a CD ratio of 47.56 percent.

As the government signals a stronger push for credit expansion and financial inclusion, banking institutions are expected to play a more active role in meeting credit needs, especially in sectors and regions that have remained underserved.

The coming quarter will be crucial in determining whether banks can deliver on the three-month saturation mandate and reverse the current trend in credit deposit performance.